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Daily Metals CommentaryFriday February 29, 2008

We welcome those who are interested in managed futures/options programs to visit our site at http://www.nsfutures.com/managed.cfm. PRECIOUS METALS COMMENTARY 02/29/08

TEMPORARY OVERDONE CONDITION THE BULLS NEED SOMETHING FRESH OVERNIGHT CHANGES THROUGH 3:15 AM (CT): GOLD +6.10, SILVER +8.00, PLATINUM +1.30 London Gold Fix $957.00 +$12.00 LME Copper stocks 143,650 tons -1,200 tons GOLD stks 7.372 ml oz +59,813 oz SILVER stks 134.9 ml oz +113,127 OUTSIDE MARKET DEVELOPMENTS: Clearly the gold and silver markets have seen a very favorable outside market environment this week, with persistent weakness in the US Dollar, repeated new all time highs in oil prices and certainly ongoing financial and flight to quality concerns arising from the US credit market condition. However, the bull camp also seems to be playing up the inflation threat aggressively and with a host of physical commodity prices showing strength this week, the inflation argument appears to be gaining as much prominence as the focus on the weakening US Dollar. Apparently comments from the US Treasury Secretary, advocating a strong Dollar were of little consequence to the Dollar, as it has remained within close proximity to its recently posted new low in the early trade today. Overnight the metals markets were presented with somewhat mixed to weak international economic data from Japan, the Euro zone and Switzerland, but apparently the currency markets aren't exactly poised to alter their bullish views toward almost anything non-Dollar. In fact, with the trade mostly expecting to see more evidence of slowing from the US in an active scheduled report slate this morning, it is not surprising to see the currencies mostly holding their recent gains against the Dollar, in the wake of slack global readings. It is also clear that the precious metals markets are deriving some buying power from strength in oil prices, but in looking at the headlines in the mainstream press coverage overnight, there continues to be a number of flight-to-quality themes that have continued to push money toward the metals and away from other instruments. GOLD GOLD MARKET FUNDAMENTALS: The talk of production problems from South Africa has died down somewhat recently but the investment buzz toward gold and the precious metals in general remains vibrant overnight, with a host of analysts and traders openly touting the even number psychological price target of $1,000 an ounce. Some players might suggest that bullish sentiment is getting ahead of itself with those $1,000 predictions, while others think that the headline hype will simply prompt follow through speculative and fund buying interest. However, traders should note a bit of divergence between the gold market early today and the silver and platinum markets. In fact, platinum has showed some consistent choppiness at the end of this week. However, the trade seems to be supported by expectations of further declines in the Dollar, further strength in oil prices and perhaps most importantly, on the prospects of further US financial troubles. On the other hand, April gold prices from their low

earlier this week, have already seen a rally of $49.60 an ounce this week and with various COT positioning report readings showing gold to be holding either a record/or near record spec long positioning in some categories the overbought argument is not without some merit. However, the bull camp will probably suggest that historic inflation and financial market concerns justify record spec positioning. With the Press openly touting $1,000 gold we get the sense that the market is at least temporarily overly bullish. However, there is very little evidence to suggest that the gold bull market is set to end it up trend. In fact, we would not be surprised to see a slide into negative ground today, quickly countervailed by bargain hunting buying. The trend is up, but volatility could be two sided today. SILVER SILVER MARKET FUNDAMENTALS: Like gold, the Press mostly continues to tout a bullish mantra, but in the case of silver, the mantra this week centers on silver being a cheaper long entry opportunity into precious metals than the gold market. Certainly seeing gold and platinum prices consistently post new all time highs recently, with silver prices only managing to return to the vicinity of "27 year highs" points to some form of undervalued pricing and for the last week that argument has served the bull camp in silver very well. While the silver market isn't paying that much attention to physical supply and demand evidence, it should be noted that Chinese January imports of silver jumped an impressive 105%. However, it should also be noted that silver has recently also seen some evidence of rising production and news of various minor silver discoveries. On the other hand, the silver market would seem to be heavily focused on the prospect of investment buying and therefore the ebb and flow of physical supply potentials has been mostly relegated to the background. Silver has also recently benefited from ongoing weakness in the US Dollar and therefore the silver market will probably take more than a passing interest in the US scheduled data due out early in the trading session today. The recent low in the US Dollar was 73.68 and therefore that level could be critical to the silver trade today. Like gold, we are a little concerned that bullish sentiment might be somewhat overdone. We are also concerned that silver and platinum prices are diverging with gold prices and that the low to high gain in March silver this week of $2.04 an ounce, suggests that silver prices are short term overbought. However, as in gold, one should not expect the up trend in silver to come to an end under the current environment, but one should be open to the prospect of more significant "two-sided" volatility today.

METALS TECHNICAL OUTLOOK: Note: Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. COMEX GOLD (APR) 02/29/2008: A new contract high was made on the rally. Momentum studies are trending higher but have entered overbought levels. The close above the 9-day moving average is a positive short-term indicator for trend. A positive setup occurred with the close over the 1st swing resistance. The near-term upside objective is at 975.6. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 972.2 and 975.6, while 1st support hits today at 962.8 and below there at 956.7. COMEX SILVER (MAR) 02/29/2008: A new contract high was made on the rally. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's close above the 9-day moving average suggests the short-term trend remains positive. Since the close was above the 2nd swing resistance number, the market's posture is bullish and could see more upside follow-through early in the session. The next upside objective is 2009.5. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 1989.0 and 2009.5, while 1st support hits today at 1937.1 and below there at 1905.5. Futures and options trading involve substantial risk. The valuation of the futures and options may fluctuate, and as a result, clients may lose more than their original investment. In no event should the content of this website be construed as an express or implied promise, guarantee or implication by or from NSfutures Group or Fox Investments that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future results. Information provided on this site is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. The organizations and links presented in this website are in no way affliated with NSfutures Group or Fox Investments. NSfutures Group or Fox Investments does not necessarily promote or endorse the services or publications described herein. NSfutures Group or Fox Investments has no role in the production or review of these products or services and makes no warranty, either expressed or implied, as to their contents, accuracy or performance.